Women investors are slowly changing the face of venture and angel capital

MADISON – Toni Sikes delivered more than 100 investment pitches on behalf of early stage companies – including her own – to venture capitalists over the course of a dozen years. During that time, Sikes recalled, she met two women venture capitalists, one in New York and the other in Seattle.

“All the others were men,” said the Madison-based entrepreneur. Today, Sikes is just another one of the boys.

Well, not exactly, but Sikes is a venture capitalist in a woman-led firm – still an uncommon sight in a world dominated by the most alpha of alpha males.

That world is changing in ways that are subtly affecting private equity investment patterns in Wisconsin and beyond. For some emerging companies, especially those with women in positions of leadership, that may provide a slight edge in the ever-competitive arenas of venture and angel capital.

Sikes is a partner in Calumet Venture Fund, a three-year-old Wisconsin-based venture capital firm. It was one of only a handful of women-owned firms among 462 active venture capital firms in the United States in 2010, according to the National Venture Capital Association. No more than 7 percent of the general partners in those firms are women, according to industry estimates.

It’s why women VCs such as Sikes still stand out when they enter a boardroom.

Calumet’s other partners include Judy Owen, a veteran entrepreneur and investor with ties to California’s Silicon Valley, and Tim Williams, who brings similar credentials to the firm. Together, they are scouting for deals in tech sectors such as software, eCommerce, online marketing and mobile technologies.

Like virtually all young venture firms, Calumet turns down far more deals than it ever finances. Still, its portfolio already includes one company – CraftEdu – with a woman co-founder. It’s among the signs that women investors are less cautious than previously believed, especially when they’re not the only woman at the table.

A recent study from the University of New Hampshire Center for Venture Research revealed that stereotypes about gender affect the investment decision-making of women, even among successful women. It relied on a sample of data from 183 angel investment groups collected over six years.

When an angel investment group had a small percentage of women, researchers found, the group was more cautious about investing. However, when women comprised more than 10 percent of the investment group, their presence led to increased investments.

“At first the results were counterintuitive, since previous research on women investing, in general, shows women to be more cautious investors,” said UNH’s Jeffrey Sohl. “However, our research indicates that when the number of women in an angel group increases, so does their investment activity as angel investors.”

Chalk it up to what psychologists call “stereotype threat.” As Sohl explained, “When there are few women in an angel group, the stereotype of cautious investing is accentuated. As the number of women increases, there is less of a stereotype – there are more women so they are more recognized for their ability as investors and less because of their gender.”

Illuminate Ventures, a San Francisco venture firm founded and led by a woman, recently released a study that tends to reinforce that theory. It concluded that venture firms with at least one woman partner are 70 percent more likely to invest in a female-owned company – and not because of any “pink” bias. That same study concluded that women-owned startups make more efficient use of capital, fail less often and tend to provide greater returns over time.

Sikes and Owen are not alone in Wisconsin. Teresa Esser is managing director of Silicon Pastures, an angel network, and a partner in Capital Midwest Fund, an emerging fund in Milwaukee. Phenomenelle Angels in Madison is an early stage fund that invests primarily in women-owned businesses in the Midwest. Four of its five top managers are women, including managing director Lauren Flanagan. Women Angels LLC, a group of women investors in Milwaukee, Miami and Chicago, is led by entrepreneur Barbara Boxer.

There are prominent national examples, as well. Golden Seeds is a 190-member angel network and fund made up mostly of women investors. Springboard Enterprises isn’t a fund, but it has helped 400 women-led companies raise more than $5 billion in private equity in 11 years.

Wisconsin has a small but noticeable head start with its cadre of women angels and venture capitalists. While having more women investors may not help Wisconsin create and attract more venture capital, it may help put those dollars to work faster, closer to home and in the right companies.

Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.

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